The Study of Direct Selling Management Strategies: An ...

1 Journal of International Management Studies * February 2008214 The Study of Direct Selling Management Strategies: An example of the Avon cosmetics company in Taiwan Yen, Jui-Yen, Associate Professor, Department of Business Administration, National Taipei College of Business, Taiwan Chen, Mei-Liang, Lecturer, General Education Center, Hsin Sheng College of Medical Care and Management , Taiwan Chen, Yi- chieh, Graduate student, Grabluate Institute of International Business Management , Ching Yun University, Taiwan ABSTRACT The Management strategy of Direct Selling is quite different than that of business administration of general enterprise; it is an industry that is highly mobile and emphasizes on interpersonal relationship; no matter it is Direct Selling or Marketing, although they can save the company a lot of cost, yet they are accompanied with uncertain risk.

2 Being affected by the rat s club due to the misuse of Direct Selling , government has to put control on Direct Selling ; currently, most people still do not know too much about Direct Selling and they worry that they might become a victim of pyramid fraud if they are not very careful, which in turn makes the spreading of Direct Selling more difficult. Therefore, some Direct Selling companies such as Avon, changes its form from single-level Direct Selling into multi-channel sale so as to adapt to the change in the social form. Therefore, in this Study , we are going to aim at the Study of one Direct Selling form, that is, in-depth Study and understanding on Avon s multi-channel system.

3 Keywords: Direct Selling , Management strategy, 4P, channel marketing. INTRODUCTION Master of Management Peter F. Drucker once said: What an enterprise is, is decided by the customers 1. For a successful Direct Seller, in addition to treating himself/herself as part of the business body to accurately reflect enterprise image and concept, it is more important to clarify and satisfy real customer s need through sincere and objective mind. This is also the most important spirit of Direct Selling and is the reason why an excellent Direct Selling company stays strongly in the market. In the past, when the vendor sells the product using traditional Selling way, profit will be stripped off by vendors in the first stage and second stage sales channels, and the cost of the vendor will get increased greatly and accordingly.

4 No doubt, these costs will be transferred to the customer, which in turn leads to a burden to the consumer. Therefore, some suppliers, in order to reduce profit stripping in several stages by the intermediate vendors, they start to find their own personnel for the product sale, or try to use mobile technology to assist product sale, the new generation of Selling ways such as Direct Selling , Marketing and internet shopping are thus generated. In 1982, with the introduction of Amway, Direct Selling started to enter Taiwan and other Direct Selling companies started to follow. On November 1997, some companies which have the sales mainly based on interpersonal network, for example, Direct Selling for example, Amway, SHUANG HOR (HK) COMPANY LTD.

5 , Nuskin Taiwan, Forever, etc., started to launch company s web sites for sales and business promotion so as to enhance the business operation efficiency of Direct Selling ; these companies are seen with great potential. At that time, Direct Selling Association also reduces its entrance barrier for the membership application, that is, a company will have the qualification to become a member once it is founded for more than one year; and a commission for promoting commercial virtues has been founded to implement the restrictions of commercial virtues on the companies in this industry. Direct Selling can be divided into single level Direct Selling and multi-level Marketing; however, in recent years, to cope with the change of industry environment, some of the Direct Selling companies such as Avon started to shift its Journal of International Management Studies * February 2008 215 strategy toward the development of multiple channels for Direct Selling .

6 We hope, through this Study , to understand the business operation system and planning in Direct Selling and compare the advantages, disadvantages, opportunities and threats of different business systems; we hope that the results of this Study can be used as reference by companies or people in the Direct Selling industry. RELATED LITERATURE Definition of terms The definition of Direct Selling World federation of Direct Selling associations (WFDSA) has defined Direct Selling as: On non-fixed retailing places and through the use of face-to-face way, the product and service are sold directly to the consumers. Robert A. Peterson & Thomas R. Wotruba (1996) briefly described the Direct Selling as a face-to-face Selling without fixed retailing sites.

7 However, the Direct Selling education foundation of USA in 1992 had a definition on Direct Selling : Direct Selling is a distribution method for consumptive product or service through personnel contact (Sales personnel to the purchaser) and at different commercial locations, mainly at home. Here the nature of consumptive and distribution way are emphasized fro Direct Selling . Direct Selling can be categorized in two ways in broad sense and in narrow sense. In broad sense, Direct Selling is a Selling way that the manufacturer or the product importer sells the product directly to the final consumer. For example, the fisherman sells the fishes to the customers directly and the farmers sell the rice directly to the consumers, etc.

8 However, for further definition, the Direct Selling in broad sense should include the narrow Direct Selling : product manufacturer or importer, through Direct Seller and consumer and through a way of face-to-face Selling , introduces or sells the product or service to consumers. Generally speaking, Direct Seller is not employee of the company and the Selling is usually done in non-fixed Selling site (Professor Te-Fa Chen, 2006). Today, both Direct Marketing and Direct Selling are sometimes all called Direct Selling . However, a Direct effectiveness Selling is that the product manufacturer or importer, through the mail of DM, catalogue , broadcasting, TV channel, internet, etc.

9 , transfer the product and service information to the consumer, and the consumer then reply through mail or answer through telephone (Professor Te-Fa Chen, 2006). Therefore, we can see two keys in Direct Selling : Face-to-face Selling and Sell at non-fixed places . Direct Selling is a process of face-to-face communication between two persons, and the Direct effectiveness marketing is way of Selling product or service such as mailing of catalogue , telephone/TV marketing, Direct reply to the advertisement or the recent emergence of network marketing. The lack of face-to-face contact is the major difference between Direct Selling and Direct effectiveness marketing.

10 Direct Selling further includes single level marketing and multi-level marketing. In single level Direct Selling , Direct Seller is also the consumer and Direct Seller sells the product or service of the company to the customer, then the Direct Seller receives bonus from the company according to his/her sale performance. In single level Direct Selling , the income of Direct Seller comes directly from the retailing profit he/she sells the product to the final consumer (Professor Te-Fa Chen, 2006). Multi-level Direct Selling is also called network marketing, in addition to getting profit through the sale of product or service, Direct Seller can also become an upstream to absorb or instruct customer to become downstream Direct Seller, then the Direct Seller is awarded with rank and bonus according to the number of persons in his/her downstream and the sale performance.